Thursday, October 8, 2009

Let Them Eat Platitudes, Part II

by the Sandwichman

Richard Lipsey stirs up the following omelette of platitudes in a review of Peter Victor's Managing Without Growth: Slower by Design, Not Disaster:

On employment, in spite of dire predictions, continued growth has created many more jobs than it has destroyed, holding North American unemployment to levels that can be dealt with fairly easily by public policy.

Where to begin? I guess with the observation that the cliché Lipsey undoubtedly had in mind is "technology has created many more jobs than it has destroyed." But this still evades the burning question, why would an emeritus professor of economics, who has written a prize winning book on technology and economic growth, need to reach for a cliché precisely at the moment he is addressing the core issues of employment and growth?Perhaps Professor Lipsey's complacent opinion about how easily unemployment can be dealt with by routine public policies offers a clue. One might ask, if it's so easy why is the official unemployment rate in the U.S. now 9.8%? Why is youth unemployment and underemployment at an astounding 32%? Perhaps Professor Lipsey hasn't heard that a long bout of unemployment in youth has future employment consequences that last a lifetime? Lipsey mixes up his clichés about technology and growth because his concept of the relationship between public policy and employment is also a cliché: public policy creates jobs by stimulating growth. Sure, there are so-called "active labor market policies" but they are ineffectual in the absence of sufficient demand for labor. They are only supplementary to the main game, which is growth, growth, growth.

Of course Peter Victor's point is all about how we cannot continue with such one-dimensional growth-obsessed policies because of resource constraints and the environmental consequences of greenhouse gases and other pollutants. And not only are there environmental limits to growth but social limits as well, as Fred Hirsch eloquently demonstrated 30 years ago. In his review, Lipsey takes no note of Victor's extensive discussion of the centrality of the growth imperative in economics, based largely on H.W. Arndt's 1978 gem, The Rise and Fall of Economic Growth. A Study in Contemporary Thought. If he had, he might have noticed that the growth compulsion in economics relates back to the view that you can't have full employment without economic growth.

Like any other self-fulfilling prophecy, experience has shown that, indeed, if you eschew any other policy for achieving full employment, then you can't have full employment without the only policy that you do allow. The old hammer/nail principle. But the converse is not true. You can have economic growth without full employment. And the single-minded pursuit of "only one particular application of an intellectual theorem" over more than a half century has eroded the effectiveness of that strategy. To put it simply, you need more economic growth per job created today than you would have 60 years ago. The GDP is much, much bigger than it was 60 years ago, both in absolute terms and per capita.

What this loose coupling of growth and employment implies for the great green utopian fantasy of uncoupling fossil fuel consumption and greenhouse gas emissions from economic growth is grim indeed. Yes, you can easily achieve relative uncoupling of greenhouse gas emissions per dollar of GDP. But since a large component of GDP is the measurement of energy consumption and throughput, such a relative uncoupling has to be accompanied by a more than compensating increase in market economic activity elsewhere if you are still going have economic growth. And if the rationale for economic growth is that you need it to generate jobs, then you're going to have to have an ever greater increase in non-energy intensive economic growth to offset the diminishing job-creating effectiveness of the growth policy.

And what is it all for? To ensure the expansion of superfluous labor time. That is to say the point of it all is to expand the amount of work being done regardless of whether or not that work is socially necessary for the production of sufficient material wealth to comfortably feed, clothe, house and educate the entire population.

3 comments:

grassroot
said...

Only an economist could coin a term like "loose coupling" and say it without giggling. ;-)

But seriously, I enjoy your ideas. I have a concern that the right and left wings of our conventional wisdom share the assmption that we can and should get back to growth. Not gonna happen. We need to develop steady state economics.

The "growth in jobs" that Lipsey observes is nothing more than a measure of population growth. The problem is that, although jobs have grown (except during recessions), the growth hasn't kept pace with the growth in the labor force.

Unemployment, both in the U.S. and the world as a whole, marches ever higher because the field of economics doesn't account for the relationship between population density and per capita consumption.

Following the beating the field of economics took over the seeming failure of Malthus' theory, economists adamantly refuse to ever again consider the effects of population growth. If they did, they might come to understand that once an optimum population density is breached, further over-crowding begins to erode per capita consumption and, consequently, per capita employment.

And these effects of an excessive population density are actually imported when a nation like the U.S. attempts to trade freely with other nations much more densely populated - nations like China, Japan, Germany, Korea and a host of others. The result is an automatic trade deficit and loss of jobs - tantamount to economic suicide.

Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!

If you‘re interested in learning more about this important new economic theory, then I invite you to visit either of my web sites at OpenWindowPublishingCo.com or PeteMurphy.wordpress.com where you can read the preface, join in the blog discussion and, of course, buy the book if you like. (It's also available at Amazon.com.)